The Personal Touch

Sam’s Club member Jeffrey Bradshaw meanders up and down the aisles of the warehouse store in Secaucus, N.J. With one hand he controls a crammed shopping cart. In the other he holds a one-of-a-kind shopping list — it’s a printout of discounts created especially for him based on past purchases.

“Sometimes I can get a dollar or two off a $16 item. It helps in the economy we have today,” he says. Bradshaw, who shops the store up to four times a week, says that Sam’s often knows what he wants to buy before he does.

The ability to offer personalized discounts via a program dubbed eValues, as well as to anticipate Bradshaw’s shopping behavior, doesn’t come about by happenstance. It’s the result of an elaborate labyrinth of complex technologies including predictive analytics, enterprise mining, grid technology and business intelligence — all of which are used to extract vast amounts of data from across the enterprise.

Complicated as that may seem, Sam’s Club president and CEO Brian Cornell insists investments in leading-edge technology are aimed at fueling growth. “It boils down to leveraging member insights to understand what drives demand and how to serve our shoppers better,” he says. “Focusing on what our members want has become our rallying cry.”

Available exclusively to Sam’s Club “plus” members who pay a higher annual membership fee, eValues provides customized offers based on members’ buying histories.

“As a warehouse club we have a unique asset in that we can see all the transactions of our members,” says Linda Vytlacil, vice president of member insights for the Sam’s Club division of Walmart. “The fact that they’ve paid to shop with us sets up a different relationship. Members have an expectation that because we capture this information about them that we will do something good with it. What we endeavor to do with eValues is to help them have a better experience — one that is personalized and relevant.”

Incentives to explore
It appears to be working. During Walmart’s Analyst Day in August, Sam’s Club executive vice president for marketing, membership and e-commerce Cindy Davis reported that in 2009 (when the eValues program was first introduced) the percentage of members who joined at the “plus” level grew 46 percent, and the momentum continues. “Year-to-date we’ve seen continued growth in ‘plus’ penetration — it’s up 36 percent,” Davis told analysts.

Unlike other shopper loyalty programs or rewards that require shoppers to clip and carry coupons, eValue offers are automatically loaded on the member’s card. Shoppers have the option to access their personalized discounts online from their home computer, via a mobile app or in the club at an eValues kiosk.

“In our warehouse format, we offer our products at an everyday low price,” Vytlacil says. “Using predictive analytics we’re able to understand what our members want and what they buy most often and provide additional savings.”

Still, Vytlacil points out that while offering discounts on the items members already buy is easy, she and her team also apply their analytics expertise to helping shoppers explore areas of the store they may be overlooking.

“If a member has been buying diapers, but they’ve never purchased baby wipes from us, we might make an offer to them on baby wipes,” Vytlacil says. “Maybe they’ve been buying baby wipes and diapers but they’ve never made a purchase from our pharmacy. They’re likely to receive an offer that, we hope, will encourage them to shop more of the club. It’s a means of building loyalty and retention.”

A core execution tool in Sam’s Club’s predictive technology platform is the FICO Retail Action Manager. Jane Johnson, vice president of FICO’s retail practice, says the software uses members’ buying history to develop a “purchase propensity model” by which Sam’s Club is able to predict what a shopper is likely to buy each month.

“There’s not just one model,” Johnson says. “The software builds propensity models at the sub-category level for all of the manufacturers who participate in the program and generates model scores for every member.”

While the eValues incentives vary by member, Sam’s Club typically looks to optimize the program by taking into account profitability, sales and margins. “A set of personalized offers might include four rewards, four incentives that make sense based on past purchases and four cross-category offers aimed at getting members to explore parts of the store where they’ve never made a purchase before,” Johnson says.

Given the number of customers, club locations and the amount of products and variations in offers that Retail Action manager’s optimization engine will process, there are literally trillions of possibilities for ‘plus’ members — which is why programs like eValues are few and far between. “Sam’s is clearly a frontrunner,” Johnson says.

That may change as others get a sense for the potential return on investment. Mass marketing typically yields a 1-2 percent response rate; segmentation analysis can lift response rates to 5-6 percent. Johnson claims that companies using the predictive analytics embodied in Retail Action Manager achieve response rates of up to 20 to 30 percent.

‘A wealth of data’
The foundation of Sam’s Club’s deep business analytics is built on a portfolio of SAS tools that include Enterprise Miner and Enterprise Guide, which operate on grid technology.

“Sam’s is in an enviable position as a club because they have a wealth of data about their members,” says Diana McHenry, director of global retail product marketing for Cary, N.C.-based SAS. “Using analytics they’re able to uncover patterns, opportunities and insights more quickly than competitors and that knowledge drives proactive decision-making. It’s a vital capability when it comes to building relationships with consumers.”

McHenry acknowledges that all retailers have accumulated huge volumes of data, yet being able to mine the data to better understand customer purchase behavior and market baskets or the value of fast- and slow-moving inventory items is a challenge for most. “The ability to turn data into useful insights is where the future lies and Sam’s has a running start,” she says.

Vytlacil is reluctant to share specific response rates on the eValues program, but there’s little doubt that the company is upbeat about the role of analytics across the business. “We’ve been mining data and using analytics for several years now,” she says. “Being able to understand what our members buy and uncover areas where we could be more relevant to them is very powerful for us.”